In its first set of results as a listed company, M&G (MNG) shrugged off a rise in pro-forma operating expenses, weaker fee-based revenues, and a jump in restructuring and one-off costs to record a post-tax profit of £1.07bn for 2019. That was up almost a third on the prior year, though the stock market reaction – as it largely has been since last year’s spin-off from Prudential – amounted to little more than a shrug.
There are good reasons for that reaction. First, the delta in the bottom line was almost entirely due to short-term fluctuations in investment returns, which are non-recurring.
Second, underlying momentum is negative in both of M&G’s core divisions. Though adjusted operating profits from the savings and asset management business edged up 1 per cent, costs rose relative to income, while pressure on retail investor fees caused the average profitability to decline 2 basis points to 0.38 per cent of assets. Average funds under management also flatlined as decent investment performance was offset by net outflows.
Added to this, there was a sharp contraction in M&G’s closed insurance book, as income from both for-profits funds and shareholder annuities dipped. The combined result was a 29 per cent drag on the group's adjusted operating profits.
Hiddensee analyst Craig Bourke forecasts earnings of 24.7p per share this year, rising to 26.6p in 2021.
| M&G (MNG) | ||||
| ORD PRICE: | 170p | MARKET VALUE: | £4.43bn | |
| TOUCH: | 170-170.6p | 12-MONTH HIGH: | 253p | LOW: 166p |
| DIVIDEND YIELD: | 7.0%^ | PE RATIO: | 4 | |
| NET ASSET VALUE: | 197p* | SOLVENCY II RATIO: | 176% | |
| Year to 31 Dec | Gross premiums earned (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 10.3 | 1.40 | nil | nil |
| 2017 | 13.1 | 1.33 | nil | nil |
| 2018 | 13.1 | 1.00 | 31.1 | nil |
| 2019 | 11.1 | 1.31 | 40.9 | 11.92 |
| % change | -15 | +30 | +32 | - |
| Ex-div: | 16 Apr | |||
| Payment: | 29 May | |||
| ^Excludes special dividend of 3.85p a share. *Includes intangible assets of £1.4bn, or 55p per share. | ||||
